This video game maker was Australia’s big hope. It’s on life support

The company is now embroiled in a dispute with Adelaide businessman and major shareholder Shane Yeend over a $2 million payment for shares. Mighty Kingdom is also trying to pay back a $1.3 million loan (at 16 per cent interest) that it borrowed against its future R&D tax grant.

Ms Guthrie, who has withstood a wave of board resignations recently, has pledged to participate in the 1¢ placement, along with interim chief executive Simon Rabbitt.

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According to its prospectus, Mighty Kingdom was reporting $2.5 million in revenue at listing but booking a $3.5 million loss. It was also carrying a $2 million tax debt.

Founder and chief executive officer at the time, Phil Mayes, did not sell into the IPO, but was forced to contend with an immediately sliding share price as the market grappled with the company’s lack of ongoing game development work.

As interest rates began to rise and loss-making tech companies fell out of investor favour, Mighty Kingdom was forced to raise capital several more times at diminishing valuations.

Its plan to develop its own original games was put on hold as more immediate revenue from selling its development services to other companies, including Google, was favoured.

Boss battle

But it became obvious that the company was running out of runway last year when losses blew out to $10 million.

Mr Yeend, founder of Gamestar Studios, emerged as a major shareholder in August 2022, adding another strong voice about future strategy.

He has built a career acquiring the rights to market interactive games based on popular culture. He developed games featuring marquee brands such as Deal or No Deal, Battle of the Sexes, and Fifty Shades of Grey.

Just before Christmas, Mighty Kingdom agreed to transfer 12 million shares to Mr Yeend in return for $4 million, broken into two tranches. The two parties signed a shareholder subscriber agreement.

As per the agreement, Mighty Kingdom embarked on a cost-cutting program and fired a wave of developers, promising investors it would save $350,000 a month.

Game over?

By Christmas 2022, company insiders said Mr Mayes’ vision of building Mighty Kingdom into an independent game producer had fallen completely by the wayside.

He resigned in January and Mr Yeend – who controlled about 32 per cent of the shares – became CEO. Mr Mayes remained a major shareholder.

Not long after his appointment as chief executive, a dispute between the Mighty Kingdom board and Mr Yeend emerged.

The company said Mr Yeend’s investment company, Gamestar Studios, had failed to pay $2.1 million for the second tranche of shares he received. But Mr Yeend argued Mighty Kingdom had failed to reign in costs as per the share subscription agreement.

In June, Mighty Kingdom reported a loss of $9 million. By August, the company was at risk of running out of money completely.

It accepted a $1.3 million loan from Radium Capital, an Adelaide-based lender that provides cash against future research and development tax credits.

The $1.3 million loan was against 80 per cent of Mighty Kingdom’s 2023 R&D tax rebate. According to its ASX filings for the two preceding years, Mighty Kingdom regularly claimed just over $1 million a year.

In September, Mighty Kingdom hired lawyers to chase down the $2.1 million.